The global economy expanded moderately again in the final quarter of 2024. This expansion varied across regions. Economic activity remained buoyant in the United States, and in China it strengthened somewhat due to government stimulus measures and strong exports. Similarly, price-adjusted gross domestic product (GDP) grew more vigorously in Japan. By contrast, economic output in the euro area rose only slightly. This was also due to the elimination of one-off effects that had supported growth in the third quarter, such as the Olympic Games in Paris. Economic activity in the United Kingdom remained subdued. 

The regional dichotomy in industrial activity also continued in the fourth quarter. Globally, industrial output is likely to have expanded quite substantially in the final quarter of 2024. However, output growth continued to be driven primarily by emerging market economies. In the advanced economies, industrial activity remained weak. Exports of goods also only picked up in the group of emerging market economies. Expectations of higher US import tariffs probably contributed here. 

The tighter US trade policy stance could weigh heavily on world trade and global activity. Newly elected US President Trump intensified his tariff threats against Canada and Mexico, the United States’ main trading partners. US import tariffs on China have already been raised, although so far not nearly by as much as was announced before the presidential election. Recently, the US government has also adopted additional tariffs on imports of steel and aluminium and announced broad-based tariff increases against many of its trade partners. Actions of this kind could provoke retaliatory measures from affected countries. Should that occur, the United States has announced that it will respond with further tariff steps. This could lead to severe trade conflicts. Against this backdrop, trade policy uncertainty rose considerably worldwide. The heightened uncertainty alone could already be dampening global activity. 

The IMF also warned against trade policy escalation in its regular update in January 2025. According to the IMF, a new wave of tariffs would dampen investment, distort trade flows and disrupt supply chains. 1 Economic growth could be affected in both the short and medium term. In the current environment, with inflation expectations still slightly higher and high capacity utilisation in many countries, comparatively strong inflationary effects are also to be expected. The IMF raised its global growth forecast, which did not yet take into account the new US government’s trade and economic policy measures, slightly to 3.3 % for this year. For 2026, it left the forecast unchanged at 3.3 %. IMF staff also broadly maintained their inflation outlook, in which consumer price inflation in the group of advanced economies will decline to 2.1 % this year. 

Energy commodity prices temporarily picked up markedly. Continued production cuts by OPEC and its partners, as well as new US sanctions against the Russian oil sector, pushed up oil prices at the beginning of 2025 (see supplementary information “The impact of western sanctions on Russian oil exports”). Since then, however, oil prices have again declined markedly. The new US administration’s appeals to expand oil production in the United States and in OPEC countries probably played a major role here. At the same time, emerging trade policy conflicts are likely to worsen prospects for global oil demand. Against this backdrop, the International Energy Agency (IEA) currently expects global oil markets to be well supplied in 2025. 2 As this report went to press, Brent crude oil cost US$78 per barrel, only slightly more than in November. By contrast, European gas prices (TTF) have tended to rise noticeably and, at €49 per megawatt hour, are significantly higher than a year ago. In addition to less favourable weather conditions, which are accompanied by higher gas demand, this increase is likely to have been driven by the expiration of gas transit through Ukraine. As a result, European gas storage facilities are currently at 43 %, significantly lower than in the previous year. In addition to energy commodity prices, food commodity prices have also risen markedly recently, especially for coffee and cocoa. 

The disinflation process has made little progress recently. In the group of advanced economies, the increase in consumer prices within one year rose to 2.9 % in January 2025, compared with 2.4 % in October 2024. This was mainly due to base effects and the recent rise in energy prices. The core rate excluding energy and food remained stable at 3.1 % over the same period. Inflationary pressure remained stubbornly high, particularly in the services sector.

In China, economic growth increased somewhat at the end of 2024. Real GDP rose significantly in the final quarter of 2024, increasing by 1.6 %, seasonally adjusted, compared with the previous quarter. The government thus precisely achieved its 2024 growth target of 5 %. Higher private consumption was important for the final year-end spurt. This was mainly due to government purchase incentives, such as vehicle and household appliance scrapping schemes. In addition, exports of goods remained very vigorous. Measured in US dollars, they exceeded their previous year’s figure by one-tenth in the fourth quarter. 3 As imports continued to be sluggish, customs statistics indicate that China achieved a record trade surplus of nearly US$ 1 trillion last year.

Despite this short-term improvement, the underlying trend remained subdued. The additional tariffs imposed by US President Trump at the beginning of February on all imports from China could hit the Chinese export economy significantly. In response, China introduced retaliatory tariffs on certain US products. All in all, there is a risk that trade tensions between the two economies will intensify further. Domestically, the crisis in the housing market has still not been overcome. The increase in private consumption at the end of 2024 is also likely to be partly due to forward effects and therefore not sustainable. In any case, the strengthened growth had hardly been reflected in prices. Consumer price inflation was only slightly above zero in December. The core rate was also still very low at 0.4 %.

In India, the economy appears to have continued to expand at a slower pace. Annual GDP growth in the third quarter of 2024 slowed significantly again to 5.4 %. Over the past few months, expansion appears to have continued at a slower pace. For the new fiscal year, the government plans to stimulate domestic private demand through tax cuts. Consumer price inflation weakened slightly in recent months, reaching 4.3 % in January. The central bank is aiming for a band of between 2 % and 6 % for inflation. At its monetary policy meeting in early February, it lowered its key interest rate by 25 basis points to 6.25 %.

Brazil’s economy is also likely to have expanded markedly at the end of 2024. In the third quarter, economic output exceeded the previous year by 4 %, and in the final quarter this strong expansion has probably continued. However, there are now growing signs of overheating. There is a very high level of employment by Brazilian standards, and wages are rising steeply. Consumer price inflation rose to 4.8 % in the final quarter, putting it above the central bank’s target corridor. Contrary to the global trend, the bank thus raised the key interest rate from 10.75 % in October to 13.25 % at the end of the period under review. 

In Russia, the economy appears to be increasingly reaching supply-side limits. According to the first official estimate, much as in 2023 real GDP grew sharply in 2024 as a whole, reaching 4.1 %. 4 Supply-side bottlenecks were becoming increasingly apparent in the labour market in particular, partly because of the recruitment of soldiers. The unemployment rate, at 2.2 %, was at a historical low, and wages rose sharply. At the same time, the government continued with its loose fiscal stance. High government revenue from oil sales continued to safeguard the budget (see supplementary information “The impact of western sanctions on Russian oil exports”). Consumer price inflation increased further in recent months, reaching 9.9 % in January 2025. Nevertheless, the central bank kept its policy rate at 21 %.

In the United States, the economic upswing persisted to the end of the year. In the fourth quarter, GDP rose by 0.6 % in price and seasonally adjusted terms compared with the previous quarter. Without the one-off negative effects, growth would probably have been somewhat stronger. Hurricanes and industrial disputes impacted economic activity at times. This was reflected, amongst other things, in a decline in investment in machinery and equipment. 5 Build-up of inventories came to a standstill as well. Stimulus from abroad was also absent. 6 By contrast, households remained in a spending mood. The construction sector also benefited from lively demand. Investment in private housing construction rose markedly. At the same time, fiscal policy remained expansionary. Public sector consumption and investment expenditure increased markedly again in the final quarter.

The US economy was in solid shape at the beginning of the new year as well. In January 2025, moderate employment growth continued and the unemployment rate fell slightly. There was another considerable rise in wages. Against this backdrop, there has been a recent failure to make progress in the disinflation process. In January, year-on-year consumer price inflation even rose slightly to 3.0 %. Core inflation (excluding energy and food) was still slightly above that. The Federal Reserve therefore left its key interest rates unchanged recently, after lowering the target range by a total of 1 percentage point to 4.25 %–4.5 % from August to December 2024.

The outlook for the US economy largely depends on future economic policy. According to surveys, after the presidential election in November, many companies were initially far more optimistic about the future. It appears that they linked the change of government primarily with hopes for tax cuts and deregulation. However, the new government’s first official acts also signal that calls during the campaign for a strict immigration policy and massive tariff increases are being implemented as a priority. For example, imports of goods from China have been subject to additional tariffs of 10 % since the beginning of February. Imports from Mexico and Canada could be subject to new levies of up to 25 % of the value of the goods as of March. According to government data, similar barriers to trade are being considered on imports from the EU. In addition, preparations are underway for regionally broader-based tariff increases. As of mid-March, additional tariffs are set to apply to all US imports of steel and aluminium. The introduction of reciprocal tariffs is also on the cards. 7 Such measures are not only likely to weigh heavily on the economic activity of the affected trading partners – the resulting surge in inflation and likely retaliation from trading partners could cause marked damage to the US economy. 8  

The Japanese economy expanded vigorously in the fourth quarter. According to initial estimates, GDP went up by 0.7 % in price and seasonally adjusted terms compared with the previous quarter. This good GDP result obscures the fact that domestic demand was weak. Growth in private consumption was less pronounced than in the third quarter, which can be attributed, amongst other things, to consumer price inflation, which is very strong by Japanese standards. One exception was industrial investment, which rose markedly again following a setback in the previous quarter. The fact that economic output nevertheless rose sharply was mainly due to the fact that demand was tied more strongly to domestic goods and services than before. Imports thus fell sharply and exports increased noticeably, meaning that, in arithmetical terms, GDP growth was fully driven by net exports. The unemployment rate remained low at 2.4 % in December and wages continued to rise dynamically. Inflation increased significantly at the end of the year. The phasing-out of subsidies for electricity and gas as well as sharply rising food prices led to consumer prices rising by 3.6 % year-on-year in December. Inflation excluding energy and food fell slightly to 1.6 %. The Bank of Japan expects this year’s wage negotiations to lead to strong wage increases again. It thus raised its policy rate to 0.5 % in January.

In the United Kingdom, economic output also improved slightly in the final quarter. Real GDP rose by 0.1 % in the fourth quarter in price and seasonally adjusted terms compared with the previous period. As in the third quarter, construction developed quite vigorously. Services sector activity expanded slightly. At the same time, manufacturing output declined significantly. In line with the overall weak economic developments, sentiment among purchasing managers remained subdued until the end of the period under review. The labour market situation also continued to cool. However, wage dynamics remained buoyant. The annual wage growth rate recently rose to 6.0 %. Annual HICP inflation also increased, reaching 3.0 % in January. The core rate has climbed to 3.7 %. Nevertheless, the Bank of England expected the disinflation process to continue and lowered its policy rate by a further 25 basis points to 4.5 % at the beginning of February.

In Poland, economic growth picked up momentum at the end of the year. According to provisional data, real GDP rose significantly, up 1.3 % on the quarter in seasonally adjusted terms, following an increase of just 0.1 % in the third quarter. The positive underlying cyclical trend thus prevailed again following the expiry of temporary one-off burdens. The macroeconomic recovery was broad-based. Services sector activity continued to expand substantially, and the production of intermediate and capital goods picked up markedly. The construction sector also recovered at the end of the year, mainly in the area of civil engineering. Private consumption, by contrast is expected to have increased only moderately. The continued strong inflation of 4.7 % year on year dampened the increase in households’ purchasing power. This weighed on consumer confidence and retail sales rose only marginally in price-adjusted terms. The labour market continues to be characterised by tightness. The unemployment rate remained at a very low level of 3.0 % and gross wages in the corporate sector rose by around 10 % year on year. The National Bank of Poland left its policy rate unchanged at 5.75 %.

Economic output in the euro area rose only slightly in the fourth quarter of 2024, following substantial growth in the previous quarter. According to Eurostat’s flash estimate, real GDP rose by 0.1 % on the preceding quarter after price and seasonal adjustment. In the third quarter, GDP in the euro area had risen by 0.4 % as a result of one-off factors, in particular the Olympics in France. Overall, the underlying cyclical trend in the euro area in the second half of 2024 thus remained subdued. A pronounced weakness in the manufacturing sector was offset by brisk business in some services sectors and some improvement in the construction sector. Private consumption – and probably also investment – rose accordingly, while exports continued to weaken. The outlook remains subdued overall. While the business climate has improved somewhat, and the depreciation of the euro could provide some support, various factors are hindering a considerable economic upswing. These include, in particular, the slow pace of adjustment processes in industry, domestic political instability and the reform backlog in several Member States, geopolitical crises and developments in international trade conflicts which are difficult to predict. 

Private consumption continued to grow. Although this growth was probably not as strong as in the previous quarter, private consumption remained clearly on an upward trajectory. New car registrations rose sharply after two consecutive declines, and retail sales continued to increase in price-adjusted terms. The continued marked growth in wage income alongside the return of more moderate inflation rates is likely to have played a major role in the gradual recovery in private consumption. In any case, households assessed their financial situation to have improved and increasingly stated that they planned to make major purchases. However, expectations regarding future economic developments deteriorated somewhat, and worries about unemployment grew. 

Investment activity is likely to have intensified in the quarter ended. 9 Construction production rose quite significantly until October, probably substantially supported by infrastructure measures. Housing construction also appears to have stabilised. Investment in machinery and equipment recovered somewhat after a weak previous quarter. In any case, capital goods producers’ domestic sales rose markedly after price adjustment, following a prolonged period of weakness. In addition, in view of the tightening of environmental requirements at the beginning of 2025, transport equipment was purchased to a greater extent. Expenditure on information and communication technologies and on intellectual property is likely to have risen further owing to the trend towards digitalisation. It is possible that the improvement in financing conditions has already been reflected in investment. However, the difficult underlying conditions are likely to prevent a major revival in investment activity.

Exports of goods to third countries increased somewhat in the fourth quarter in price-adjusted terms. Exports of consumer goods, in particular, probably rose markedly, but exports of capital goods also appear to have expanded somewhat. Exports of intermediate goods, by contrast, fell. From a regional perspective, revenue from exports to China continued to fall. Exports to the United Kingdom remained subdued and exports to the United States grew again. Overall, euro area exports thus continued to benefit only marginally from the growth in sales markets. The low competitiveness of industrial enterprises, which according to surveys by the European Commission has deteriorated further of late, is probably particularly noticeable here. Euro area services exports are likely to have fallen, according to balance of payments data. Goods imports from third countries rose again in price-adjusted terms. Imports of capital and consumer goods probably increased again, while imports of intermediate goods are likely to have fallen.

The slowdown in manufacturing continued. The production of intermediate goods, in particular, fell markedly in the fourth quarter, as did the production of capital goods once again. By contrast, the production of consumer goods recovered. Industrial capacity utilisation rose slightly, but continued to fall short of its long-term average. Industry is under strain not only from the subdued investment activity in the euro area, but also by its competitive weakness in international markets. Producer price pressures remained low. Thanks to falling energy prices, producer and import prices fell year on year.

The upswing in the services sectors continued. Activities in the information and communication sector in particular, as well as in the real estate sector, are likely to have increased markedly. In addition, business activity in the hotel and restaurant sector may well have increased. According to European Commission surveys, a shortage of labour continues to weigh on the services sector. The importance of insufficient demand as a factor limiting production increased in recent quarters, but remained below the long-term average.

Economic growth weakened in several Member States compared with the previous quarter. This was partly due to the expiry of one-off effects. At the same time, the persistent weakness in exports dampened growth in some places. In various southern countries, buoyant economic activity driven by domestic demand continued. 

The French economy stagnated in the final quarter. According to preliminary estimates, real GDP decreased by 0.1 %. The weakness in the fourth quarter was partly due to a countermovement after the Olympics, which had been a significant driver of growth in the third quarter. Exports were burdened by a significant decline in the export of services, which also encompass broadcast rights. Investment remained subdued overall. In this context, the increase in investment in machinery and equipment and intellectual property was offset by a significant decline in expenditure on construction. Although private consumption lost momentum, it still increased markedly. On the output side, weaknesses were evident in manufacturing in particular, and even more so in construction.

In Italy, economic output continued to stagnate. According to provisional data, real GDP in the fourth quarter remained at the same level as in the previous quarter. Stimulus is likely to have been provided by exports of goods. Industrial output stabilised after having contracted markedly in previous quarters. By contrast, imports are likely to have fallen, partly as a result of the weakening recovery in private consumption. Furthermore, gross fixed capital formation is likely to have continued to decline. Developments in construction investment are likely to have made a marked contribution to this, as there is a lack of new impetus following the gradual wearing-off of the effects of the tax bonus for construction measures in the area of energy efficiency and earthquake safety (“superbonus”), which had provided a boost for a number of years. According to initial data from the statistical office, the activity of service providers also fell.

Buoyant economic activity in Spain continued. According to preliminary estimates, real GDP increased once again by 0.8 %. Growth was broad-based on both the output and expenditure side. Construction investment rose particularly sharply. Imports also rose very significantly in view of strong domestic demand. The strong growth in the Spanish economy, which has persisted since 2021, has now driven down the unemployment rate to 10.6 %, though this remains high by euro area standards.

The picture was mixed in the other Member States. There was significant growth in Portugal and Lithuania. In the Netherlands, real GDP grew somewhat more moderately again recently, following two strong increases. A small increase was recorded in Belgium. Economic output stagnated in Austria and Estonia. There was a slight decline in aggregate economic activity in Germany (see section “The German economy”) and a marked decline in Ireland. 

The labour market situation remained favourable at the end of the year, but there were growing signs of an emerging deterioration. According to provisional data, the number of people in work rose again slightly in the final quarter. Although the unemployment rate remained at a low of 6.3 %, it rose in individual countries, including Germany and France. Employment expectations have been falling since March. The same applies to the vacancy rate. Wage growth is likely to have been comparatively strong recently, at 4 % to 5 % on the year, but the underlying trend has been declining for some time now. 

Euro area consumer prices rose again moderately in the fourth quarter of 2024 compared with the previous quarter. The Harmonised Index of Consumer Prices (HICP) rose by 0.5 % in seasonally adjusted terms, which was similarly moderate to the previous two quarters. Energy prices continued to fall, but less significantly than in the summer. Food prices increased somewhat more strongly again. Services prices continued to rise substantially, by 0.6 %, but less than in previous quarters. Inflation for non-energy industrial products remained weak. 

The HICP rate remained at 2.2 % in year-on-year terms. The continued negative contribution of energy had a slight dampening effect on the annual rate. Food prices rose somewhat more strongly than in the third quarter, in line with the rise in international commodity prices. Price dynamics remained elevated, especially for processed food. However, prices for unprocessed food also rose more sharply again recently. Inflation in services remained particularly substantial, with the annual rate of HICP inflation here persisting at around 4 % for more than a year. As in previous quarters, prices for non-energy industrial products rose moderately; the disinflation process here is thus probably largely complete. Core inflation excluding energy and food fell only slightly to 2.7 %. 

On an average of 2024, the headline rate fell significantly to 2.4 % and the core inflation rate fell somewhat more sharply to 2.9 %. In 2023, headline inflation had stood at 5.4 % and core inflation at 6.3 %. The significant decline was driven by the substantial drop in inflation for food and non-energy industrial goods. 

According to Eurostat’s flash estimate, the inflation rate in the euro area amounted to 2.5 % in January 2025. The HICP rate thus rose slightly by 0.1 percentage point compared with December. Services continued to have a significant price-driving effect. Energy prices picked up somewhat more substantially again of late. Prices of industrial goods excluding energy continued to rise moderately. Food inflation declined somewhat, but more strongly for processed food than for unprocessed food. The core inflation rate (excluding energy and food) remained unchanged at 2.7 %. The disinflation process should continue over the coming months, in no small part due to the assumption that services inflation, which is still high, will gradually decline. 

Economic activity in the euro area is expected to rise again slightly in the first quarter of 2025. The underlying cyclical trend remained moderately tilted to the upside until recently. Business sentiment even brightened somewhat at the beginning of the year. According to both the Purchasing Managers’ Index and the European Commission’s corresponding sentiment indicator, production expectations in the manufacturing sector improved somewhat from a depressed level. Sentiment indicators for services continue to point to moderate growth. However, economic conditions remain difficult and, in some cases, have deteriorated further recently. The restructuring of industry has only just begun and is taking place under high uncertainty. This uncertainty is also being fuelled by the tense international situation. Geopolitical conflicts and increasingly overt disputes over trade relations are contributing to this.

Deutsche Bundesbank (2024), The possible impact on the German economy of measures announced by the incoming US administration, Monthly Report, December 2024.

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International Energy Agency (2024), Oil Market Report, December 2024.

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